NEWS
BY AMY SCHNEIDER
REPORT FORECASTS PROS AND CONS
OF PROPOSED BUSINESS TAX
I
nitiative Petition 28 is either a savior for Oregon schools or
a doomsday tax that will ruin Oregon’s economy, depend-
ing on what you’ve read. As it turns out, it’s not so simple.
IP 28 is a proposed “gross receipts” tax — a tax on a
corporation’s sales without deducting costs and expenses
— on businesses making $25 million or more in Oregon sales.
It would generate $3 billion per year, and the petition to get it
on the ballot asks that the money be used for education, health
care and senior services.
The initiative petition has seen a spike in news coverage
lately, first because the A Better Oregon campaign, which
backs IP 28, turned in the signatures it needs to qualify as a
November ballot measure.
Then, on May 23, Oregon’s nonpartisan Legislative Rev-
enue Office (LRO) published a report on IP 28, using a model
to project how the gross receipts tax might impact the state
and its residents by the year 2022.
Since investments in education may take years to reap
solid economic benefits, the report says it cannot effectively
estimate the impact of infusing $1 billion per year into Oregon
schools.
Additionally, because the tax proposed in IP 28 is unusual
in its makeup, the report says that “both the large size of the
revenue increase under IP 28 and its concentrated impact on
a small group of large corporations add considerable uncer-
tainty to the estimates.”
Taking that into account, the report shows a number of
positive economic benefits potentially resulting from IP 28:
Oregon’s volatile, personal-income-dependent tax system
would become more stable, public sector growth would ac-
celerate and improvements in Oregon’s education system
“should lead to a more productive workforce over time,” the
report says.
The report did not evaluate the long-term benefits that a
sizeable investment in Oregon education might bring. IP 28’s
proponents say that Oregon would undoubtedly see a positive
change with education fully funded.
“The economy in the long run will be vastly better off if
people going to school graduate and we don’t lose students to
dropping out,” says state Rep. Phil Barnhart, who is in favor
of IP 28. “It’s not easily quantifiable, and it takes a while to
get there.”
Barnhart says there is consensus among Democrats and
most Republicans in the Oregon Legislature that schools are
underfunded — Oregon’s Quality Education Commission
found that Oregon is underinvesting in its schools by about
$1 billion a year.
IP 28, Barnhart says, is a way to decrease class sizes, add
classrooms and teachers and bring back supportive positions
like counselors and nurses that were lost starting with the
passage of Measure 5 in 1990, which capped property taxes
and shifted school funding from the local level to the state
level.
Katherine Driessen, press secretary for A Better Oregon,
says that “without forecasting the huge positive economic
impacts of having healthier residents and much better edu-
cation outcomes, the picture of what our state will look like
with IP 28 in place is incomplete.”
In terms of what the LRO report did include, it wasn’t all
roses. It predicted a modest dampening of Oregon’s projected
job growth by around 20,000 jobs. This projection factored in
a lack of growth in the retail trade sector and an increase in
public sector jobs, with a net loss in job growth.
It also found a marginally regressive effect on the net af-
ter-tax income of Oregon households, with a 0.9 percent loss
of income from households making less than $21,000 and
a 0.4 percent loss of income from households making more
than $206,000.
This means that in 2022, households would have less
money under IP 28 than they would have without the tax, due
to the LRO model predicting that businesses will increase
prices in reaction to the tax.
“The report confirms a lot of concerns we had from the
beginning, that the tax would show up in the form of higher
prices for food, medicine and utilities,” says Pat McCormick,
a spokesperson with Defeat the Tax on Oregon Sales, a co-
alition that includes the Oregon Business Association, the
Oregon State Chamber of Commerce and the Technology
Association of Oregon. “It’s pretty explicit about how sig-
nificantly that would be regressive.”
However, the report says that under IP 28, “the overall
distribution of the tax burden in the state is expected to re-
main largely proportional in contrast to the overall regres-
sive structure found in most states.” In other words, the tax
doesn’t interfere with Oregon’s relatively progressive tax dis-
tribution, due to Oregon’s continued dependence on personal
income tax.
Dreissen emphasizes that the model forecasts a tax paid
by all businesses in Oregon at a lower rate, not the approxi-
mately 1,000 corporations as spelled out in IP 28. “It was
disappointing to see that LRO’s model … was unable to actu-
ally simulate IP 28.”
Driessen adds, “The economic impacts, which were still
remarkably small, less than 1 percent deviations from 2022
projections, don’t demonstrate what will really happen when
IP 28 goes into effect.”
Barnhart is also critical of the model — “the report does
not do a very good job internally of describing its own limi-
tations,” he says — and he questions why businesses would
invest millions of dollars in opposing the tax if it can easily
be passed on to consumers.
“They claim that this is a sales tax, but if they really
thought that, why would they put a bunch of money into
fighting it?” Barnhart asks. “The fact that they’re fighting so
hard means that it’s not a sales tax. It’s a tax on London and
New York stockholders.”
Ultimately, Barnhart says, the report forecasts the worst
possible outcome. “When you actually figure out the weak-
nesses of the report, the actual outcome will be much, much
better than the report showed, and it will inure to the long-
term benefit of Oregon greatly.”
HAPPENING PEOPLE
VICTORIA HARKOVITCH
AND LISA SHEA-BLANCHARD
BY PAUL NEEVEL
Growing up in Nevada City in Northern California, Lisa Shea-
Blanchard got her start in community theater at age 9 with the Foothill
Theatre Company. “It was a big part of my childhood,” she says. “My
sister and my parents were involved.” Shea studied for a degree in
theater at UC Davis and an MFA at the University of Wisconsin, then
moved to Seattle and took a job at the Museum of Flight, where she met
exhibit manager Ken Blanchard. They got married and moved to
Eugene in 1995.
Fairbanks, Alaska, native Victoria Harkovitch studied elementary
education at the UO and taught in Cloverdale on the Oregon Coast
before returning for an MA in art history. She married John Holtzapple
and taught in Chapel Hill, North Carolina, while he went to med school
at UNC. After his residency in Seattle, they moved back to Eugene in
2000 for his new job at PeaceHealth.
Harkovich and Shea-Blanchard met while they were both working
with Shakespeare in the Park, a summer series of comedies at Amazon
Park. They became friends and started their own nonprofit performance
group, the Roving Park Players, in 2007. “Our basic model is free
theater outdoors,” Harkovitch says, “and we welcome everyone who
wants to do theater with us.” The Players’ 2016 summer season will
begin with Harkovitch’s adaptation of Shakespeare’s The Merry Wives
of Windsor, June 10 at Campbell Senior Center, June 11-12 at Maurie
Jacobs Park, June 16-17 at Petersen Barn Community Center and June
18-19 at Island Park in Springfield. Shows start at 6 pm and admission
is free. Learn more at rovingparkplayers.org.
eugeneweekly.com • June 2, 2016
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